Craft brewing veteran Mendocino Brewing Co. is shutting down its historic brewpub in Ukiah, California. This is following the closure of the famous Saratoga Brewing Co, which was acquired by the UB Group when they defaulted on a loan, which was around the same time the holding company purchased a majority share of Mendocino. Both Mendocino on the West Coast and Saratoga on the East Coast were craft beer pioneers in their own region.
Mendocino Brewing Co. was founded in 1983 as “The Hopland Brewery” in Hopland, CA, in the county of Mendocino by homebrewers Michael Laybourn and Norman Franks. They purchased their original brewing equipment from the historic New Albion Brewing Company, which is considered America’s first craft brewery. They changed the name to Mendocino in the early 90’s when they moved the brewery to larger digs in Ukiah, CA. Mendocino is considered the first brewpub in California and the second in the U.S. It was acquired in 1997 by Dr. Vijay Mallya, an Indian entrepreneur, and head of UB Group, which purchased New York brewey Saratoga Brewing Co around the same time which allowed Mendocino to be brewed on the East Coast. Mendocino’s flagship beer Red Tail Ale is an American style amber ale clocking in at a solid 6% ABV and just 40 IBUs; brewed with two-row malted barley, hops and a proprietary yeast strain. Mendocino Brewing Co was just the second brewpub to open after Prohibition giving the company a sort of reverent place in American beer culture. Unfortunately, Red Tail Ale may be added to the endangered beer list.
On the other side of the country, Saratoga Brewing Co. was started in Saratoga Springs, NY in 1997 by Nor’wester Brewing of Oregon and was one of New Yorks largest craft breweries. They had a 125 BBL brew house and even larger fermentor capacity, which allowed them to produce their own beer under the Saratoga label, but also contract brew for Mendocino, popular Indian beer “Kingfisher Lager” which is the flagship beer of UB Group, as well as brew beer for other New York breweries. The brewery was acquired by the UB Group when they defaulted on a loan. Upon the unforeseen closure of Saratoga, breweries that they were contract brewing for were given only 72 hours to retrieve their beer, equipment, and ingredients before the doors were locked.
The company is disclosing little information to the beer community but rumors swirling suggest that financial constraints may be the leading factor. Vijay Mallya, who acquired the brewing company in 1997, has had charges of money laundering and fraud leveled against him recently. He is also currently fighting an attempt by the Indian government to extradite Mr. Mallya back to his home country in order to face those charges.. A 2016 Securities and Exchange Commission filing known as a 10-Q (quarterly report required by the SEC) highlights the financial concerns that Mendocino Brewing’s future could be bleak, “The Company’s consolidated financial statements for fiscal year 2015 were prepared on a going concern basis. The continuation of the Company as a going concern is dependent upon continued financial support from Catamaran Services, Inc. (“Catamaran”) and/or United Breweries Holdings, Ltd., an Indian public limited company (“UBHL”), its ability to obtain other debt or equity financing, and generating profitable operations from the Company’s future operations. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.”
While the company may be in dire straights financially there are some wolf of wall street type of twists I uncovered while reviewing SEC filings: Vijay Mallya is on the board of companies who have substantial outstanding loans with Mendocino Brewing Co in excess of $2.5 Million dollars with another $175 thousand dollars due in interest. The footnotes to Mendocino Brewing Co’s financial statements from the SEC filing appears below:
“Notes payable to a related party consist of notes payable to Catamaran dated January 22, 2014, April 24, 2014, February 5, 2015, June 30, 2015, March 14, 2016, and March 30, 2016 for a total value of $2,575,200 including accrued interest of $175,200. Catamaran Holdings, Ltd. (“Holding”), the sole shareholder of Catamaran, has directors in common with Inversiones, one of the major shareholders of MBC. The indirect beneficial owner of Inversiones is UBHL. Dr. Vijay Mallya, the Chairman of the Board of Directors of the Company is also the Chairman of the Board of Directors of UBHL.
Will an investor come forward to save Mendocino as they have recently with Speakeasy Ales & Lagers and Magnolia Brewing Co? Only time will tell. Lets hope we see Red Tail Ale flourishing in the future.